Policyholders will be losers in LIC IPO: Thomas Isaac


As state-run insurure LIC readies to launch its IPO, a campaign highlighting the possible dangers of the disinvestment is taking shape in Kerala.

Economist-turned CPI(M) leader and former Kerala finance minister T M Thomas Isaac, who is among those leading the campaign, shared his concerns over the IPO with DH’s Arjun Raghunath.

What are the adverse effects of LIC disinvestment?

Policyholders losing a safe investment option and LIC losing its social commitments are the major dangers of LIC disinvestment. So far 95 per cent of LIC’s profit from both participatory and non-participatory policies was being given to policy holders as bonus, which is being brought down to 90 per cent of the participatory policy. Moreover, as private players eye more profit, there will be pressure to bring down the bonus component. This would make LIC policies unattractive.

Read | Potential investors in LIC’s giant IPO fret over govt control of insurer

Another danger in the offing is that the social commitment of LIC would end with entry of private players, who look for maximising profit. So far, LIC has been making massive investments in social infrastructure projects and offering social security schemes. These will suffer.

Won’t preference to policyholders in IPO help in tide over the fall in bonus?

Preference to policyholders in IPO is just a gimmick to suppress the resentment among them over the fall in bonus. A large number of LIC policyholders are from weak backgrounds and won’t be familiar with buying shares. LIC policies are not just a life coverage, but a safe investment option, as it offers low premium policies and assured returns. Investments in shares always involved risk factor.

Until 51 per cent shares are with the Centre, do we need to worry about any policy shift?

What is the guarantee that the centre will retain 51 per cent shares? There is immense international pressure on the centre to open up Indian financial sector for international investors. For the Centre, it is an easy option to raise money by monetising the value addition made using policy holders’ funds.

DH Deciphers | LIC: Why is India’s biggest IPO such a big deal?

Isn’t IPO a new investment option to people at a time when return from bank investments are coming down?

The policyholders were so far getting the dividend without any risks. With regard to shares, there is always a risk. We have even seen major international insurance firms like AIG collapsing. The policyholders will be the ultimate losers.

Do you have any plans to resist the IPO?

The resentment among the policyholders will definitely come out as the Centre announces further sale of shares. The policyholders will wake up and the Centre will have to bend their knees as witnessed in the farmers’ stir. A campaign is being launched in Kerala against LIC disinvestment beginning with a webinar on February 27 and a convention on March 13 in which there will be representation from all political parties, except BJP and its allies. A series of meetings across Kerala will be initiated thereafter.

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